Oil prices on target for largest Q3 gain in 13 years

Oil prices rose on Wednesday, despite data from the American Petroleum Institute showing an increase in US crude stocks. BP photo.

Oil prices on course for a rise of 15.5 per cent this quarter

Oil prices were up almost 2 per cent on Wednesday and are on course for their largest third-quarter gain in since 2004 after Iraq’s oil minister said participants in the OPEC supply cut pact are considering extending or even deepening output cuts.

Benchmark Brent settled the session up by $1.06 to $56.20/barrel and US WTI was up 93 cents to $50.41/barrel.

According to Reuters, oil is on course to rise by 15.5 per cent this quarter, making this year’s performance the strongest for the third quarter since 2004.

“An improving macroeconomic backdrop should spur oil demand growth over the next couple of quarters, and if OPEC increases its adherence to production cuts, higher prices will come,” Reuters reports ANZ Research said in a note.

“All things being equal, we still expect oil prices to test new highs (for 2017) by the end of the year.”

Speaking at an energy conference on Tuesday, Iraqi oil minister Jabar al-Luaibi said OPEC and other pact participants are considering a number of options, including extending the cuts.  He added it is too early to decide what the cartel and non-OPEC members will do beyond the agreement’s expiry date.

According to al-Luaibi, some producers think the agreement should be extended for an additional three to four months, while others want it to continue until the end of next year.  Ecuador and Iraq are said to be looking for another round of supply cuts.

Oil industry analysts say an extension alone would not have much impact on the overall oil market.

“I can’t see the market tightening unless OPEC cuts output further next year,” Commerzbank strategist Carsten Fritsch told Reuters.

Georgi Slavov, head of research at commodities brokerage Marex Spectron told Reuters he does not expect crude demand to rise significantly in the fourth quarter of 2017, meaning supply would have to be restricted even more to impact oil prices.

Data released by the American Petroleum Institute showed a decline in gasoline and distillate stocks, but an increase in crude inventories by 1.4 million barrels last week.  Analysts had anticipated a build of 3.5 million barrels.

According to data from the US Energy Information Administration, US crude stocks were up by 4.6 million barrels last week.  Crude imports averaged about 7.4 million barrels per day (b/d) last week, up by 888,000 b/d from the previous week.

US crude oil refinery inputs averaged about 15.2 million b/d, 1.1 million b/d higher than the previous week’s average.